BofA-ML cuts India's FY14 GDP forecast to 5.5 percent

Children stand next to a labourer working on the banks of river Ganges as they are silhouetted against the setting sun in Allahabad July 3, 2013.
REUTERS/Jitendra Prakash

MUMBAI Bank of America-Merrill Lynch cut India's fiscal year 2013/14 growth forecast to 5.5 percent of the gross domestic product from 5.8 percent after the central bank took steps to curb rupee liquidity, it said in a note on Tuesday.

The Reserve Bank of India announced measures late on Monday to curb the rupee's decline by tightening liquidity and making it costlier for banks to access funds from the central bank.

The investment bank said the tightening will push back lending rate cuts.

"We had earlier expected growth to stage a shallow recovery to 5.8 percent on the back of better rains and lending rate cuts. We have now removed the 30 basis points we had expected from softer rates," wrote analysts at the bank. (Reporting by Swati Bhat; Editing by Prateek Chatterjee)

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